Online gaming firms, which had unitedly opposed the proposal of 28% GST on full face value, now seem to be in a divide with larger firms reportedly ready to accept it and move on while smaller firms still believe that the tax should be levied on gross gaming revenue (GGR) and so appeals should be made for it.
Last week, some of the top executives from several online gaming firms held a meeting of the gaming committee of the Federation of Indian Chambers of Commerce and Industry (FICCI) where the issue was deliberated upon. The gaming firms, through various industry bodies, have already written to the government to reconsider the criteria of GST levy.
“Some platforms feel that it’s not practical to attempt and seek GST on GGR … that ship has sailed. But there are some companies who want a relook. These are desperate times for some such companies … those without a lot of revenues or profits may get wiped out,” a person aware of the matter said.
Revenue Secretary Sanjay Malhotra, on the other hand, has confirmed that the tax will be levied on full face value and there would be no changes regarding it. However, whether the tax will be levied on initial deposit or every contest entry amount is not clear
The decision on it is expected to be taken in the upcoming GST Council meeting on August 2 with the council also slated to deliberate on taxing virtual digital asset-based transactions on online gaming platforms and at casinos.
Industry gaming body All India Gaming Federation (AIGF), representing Mobile Premier League (MPL), Zupee, Winzo Games, Gameskraft, and several other real money gaming firms argued that tax on full face value, regardless of how it is levied, “will result in closure of most of the industry, including MSMEs, gaming startups, and even established significant players”.
AIGF has stated that with the new tax policy, only large gaming firms will survive, and the sector will see a closure of several small startups. Even those who survive will face a heavy blow in terms of revenue.
Prior to the GST Council’s decision, the companies had urged the committee members to levy GST on GGR as it is the standard practice across many international markets, even if the tax rate is increased from 18% to 28%.
Speaking to The Economic Times on the topic, Federation of Indian Fantasy Sports and E-Gaming Federation said jointly, “Any alternative on valuation, whether on entry fees or deposits, will severely impact the industry across the spectrum along with 40 crore Indian gamers.”
“28% GST on deposits will be a 350% increase to the GST levied. This will result in the closure of most of the smaller operators and will necessitate major restructuring across the industry to survive and will set back even the larger operators by several years,” they added.
Seeking equal tax treatment for all online skill gaming companies: AIGF
Meanwhile, AIGF is seeking equal tax treatment for all online skill gaming companies, irrespective of whether they are fantasy sports firms or casual skill gaming ones. There were reports that 120 casual skill gaming companies had written to the Finance Ministry, asking them to treat the former differently from fantasy sports firms for taxation purposes due to their different business models.
However, it has come to light that there was no such letter sent with those requests. AIGF has clarified that they have only sought a distinction based on games of skill and chance.
“As the oldest, largest and the most diverse industry body for online gaming, we have always been game agnostic and have advocated for all games of skill to be treated equally. Our focus is to promote the overall advancement and growth of the Indian online gaming industry,” said Roland Landers, CEO of AIGF, as quoted by The Financial Express.
The industry body has addressed a letter to the Finance Ministry, asking for tax valuation on net deposit method for all skill games, while also asking to address the issue of repeated taxation.
“This will result in increased revenue for the exchequer, while allowing all companies, especially the MSMEs to grow and contribute to the prime minister’s vision of India becoming a global gaming powerhouse,” Landers added.